|Richmond Hires Firm To
Review Business Loans
May 29, 1997
WEST COUNTY TIMES
Thursday, May 29, 1997
RICHMOND A divided City Council has agreed to hire a firm to straighten out a troubled program that gives federal funds to small businesses, despite its concerns about costs and conflict of interest.
The council Tuesday gave the Bay Area Small Business Development Corp. $12,000 and up to four months to review all loans and to make recommendations on foreclosures or other legal action against delinquent borrowers.
The group will review the Greater Richmond Community Development Corp. The nonprofit organization's board of directors has made bad loans and given preference to relatives. GRCDC loan recipients have defaulted at a rate three times the national average.
In April, the city took over the corporation to avoid losing $213,000 in federal money set aside for loans in the city's most economically blighted areas.
Council members Richard Griffin, Donna Powers and Nat Bates voted against awarding the contract, questioning the cost and whether a bank or other financial institution should be considered instead.
"Why not go to people who make money at it?" Powers said. "With a bank, they do these things, and they do them properly."
Gary Bell, chairman of the GRCDC and branch manager of Bank of the West on Macdonald Avenue, said banks aren't interested in overseeing such enterprises.
"There's just no money to be made," Bell said. "That's why these kinds of programs exist in the first place."
Powers added that it's the wrong situation for using kid gloves. "Sometimes you don't need hand-holding; you need someone to grab people by the neck."
Griffin said most of the work involves simple bookkeeping and accounting. Although the contract is for only $12,000, it could escalate, he said.
"You're talking about $48,000 a year for clerical work," Griffin said. "If we like these people we'll have to renew their contract."
Combined with money the city gives to West Contra Costa Business Development Center to teach companies business skills, "We're talking about a lot money for a few businesses," Griffin said.
Although the city's Redevelopment Agency Director David Thompson is on the Bay Area Small Business Development Corp.'s board of directors, a majority of council members saw no conflict of interest in giving the corporation the contract.
Councilman Tom Butt praised Thompson for his volunteer work. Butt also said the GRCDC has helped businesses rejected by conventional lending institutions.
"This is not city money going down the tubes," Butt said. "It was money loaned at high risk."
Butt said the council should let Thompson fix the problems.
"The city manager says he's going to clean it up and make it work. Let's give them a chance."